HomeNewsHow DeepSeek's AI Model Triggered Nvidia's $600 Billion Market Loss

How DeepSeek’s AI Model Triggered Nvidia’s $600 Billion Market Loss

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Highlights

  • Nvidia suffered a historic $600 billion market loss, the largest one-day drop ever.
  • Shares fell 17%, marking the worst decline since March 2020.
  • Chinese AI firm DeepSeek unveiled a cheaper, efficient large-language model.
  • Nvidia’s valuation fell from $3.5 trillion to $2.9 trillion, losing its top spot.
  • CEO Jensen Huang’s net worth dropped by $21 billion.
  • The S&P 500 fell 1.5%, and the Nasdaq dropped 3.1%.
  • Experts warn cost-efficient AI models could disrupt Nvidia’s growth.

Shares of Nvidia took a monumental hit on Monday, marking the biggest single-day market loss in history. The AI chipmaking giant’s stock plunged 17%, wiping out nearly $600 billion in market value.

The massive decline stemmed from growing fears about U.S. dominance in artificial intelligence as Chinese company DeepSeek unveiled a breakthrough large-language model (LLM) developed at a fraction of the cost seen in America.

This historic loss stripped Nvidia of its title as the most valuable company in the world. Its valuation fell from $3.5 trillion to $2.9 trillion, falling behind Apple and Microsoft.

While Nvidia’s GPUs remain essential for most AI systems, DeepSeek’s model has raised questions about the long-term sustainability of Nvidia’s meteoric growth in the sector.

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DeepSeek Challenges Nvidia’s AI Leadership

The release of DeepSeek’s advanced AI model is the primary driver of Nvidia’s record-breaking stock decline. DeepSeek, a Chinese AI firm, claims to have developed its LLM at a fraction of the cost spent by its American counterparts.

Although Nvidia GPUs were used in the process, the company reportedly spent just $5.6 million on the technology.

Nvidia
Nvidia

Even if this figure is underestimated, it disrupts the perception of Nvidia’s role as the cornerstone of high-cost AI innovation. Nvidia’s GPUs, which can cost up to $25,000 each, are a major source of the company’s revenue.

Its net profits skyrocketed from $4.8 billion in 2022 to an estimated $66.7 billion in 2024, driven by demand from major U.S. firms like Meta, Tesla, and OpenAI.

DeepSeek’s achievement, however, demonstrates the potential to create cutting-edge AI with significantly lower costs.

This raises concerns about whether American tech companies will begin shifting toward cost-efficient alternatives, ultimately hurting Nvidia’s dominance in the field.

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Wall Street Reacts to Nvidia’s Plunge

Monday’s events marked Nvidia’s worst percentage drop since March 2020, during the onset of the COVID-19 pandemic. The 17% dip not only shook investor confidence but also led to broader losses across the tech sector.

  • The S&P 500 fell by 1.5%.
  • The Nasdaq, heavily concentrated with tech stocks, declined by 3.1%.
  • Other AI-related companies, including chipmakers Arm and Broadcom and data giant Oracle, all saw drops of at least 10%.

Despite this, Nvidia’s spokesperson issued a statement describing DeepSeek’s model as an “excellent AI advancement.”

Deepseek
Deepseek

They emphasized that the Chinese company’s system still required “significant numbers” of Nvidia GPUs, underscoring the ongoing reliance on Nvidia’s hardware.

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The Human Cost: Nvidia CEO Jensen Huang Loses Billions

The market loss had a direct impact on Nvidia CEO Jensen Huang, whose net worth dropped by $21 billion in a single day. Huang, who owns 3% of the company, saw his wealth shrink from $124.4 billion to $103.1 billion.

CEO Jensen Huang
CEO Jensen Huang

Huang has long been a central figure in Nvidia’s rise as a leader in AI technology. However, the rise of competition like DeepSeek could challenge Nvidia’s position as the go-to provider for AI infrastructure, potentially eroding its profits and market dominance.

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Surprising Market Stats

The sheer scale of Nvidia’s $589 billion market cap loss is difficult to comprehend. To put this into perspective, the drop is larger than the market value of household-name companies like:

  • UnitedHealth
  • Exxon Mobil
  • Costco

It’s also more than double the size of Nvidia’s previous worst single-day loss in September 2024, when the company shed $279 billion.

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Expert Opinions on Nvidia’s Future

Industry analysts are now questioning the implications of DeepSeek’s breakthrough for Nvidia’s future growth.

Ed Yardeni of Yardeni Research explained that if U.S. tech giants adopt DeepSeek’s cost-efficient methods, it could lead to significant challenges for Nvidia’s business model.

Still, Nvidia remains a critical player in the AI space. Many experts argue that even with cost-saving innovations, Nvidia’s high-performance GPUs will remain necessary for developing the most advanced AI systems.

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FAQs

1. What caused Nvidia’s $600 billion market loss?

The release of an advanced AI model by Chinese firm DeepSeek triggered Nvidia’s massive market loss. The model was developed at a significantly lower cost compared to similar U.S. projects, raising concerns about Nvidia’s long-term growth potential and dominance in the AI industry.

2. How much did Nvidia’s stock fall on Monday?

Nvidia’s stock fell by 17% on Monday, marking its worst single-day percentage loss since March 2020.

3. Why is DeepSeek’s AI model significant?

DeepSeek’s AI model is significant because it showcases how cutting-edge large-language models (LLMs) can be developed at a fraction of the cost typically associated with American AI projects. This challenges the traditional reliance on expensive Nvidia GPUs, which have driven the company’s recent success.

4. How does DeepSeek’s model impact Nvidia’s business?

DeepSeek’s low-cost AI approach could inspire other companies to follow suit, potentially reducing the demand for Nvidia’s high-priced GPUs. This poses a risk to Nvidia’s profitability and market dominance in the AI sector.

5. How did the broader stock market react?

The broader stock market experienced declines following Nvidia’s plunge. The S&P 500 fell 1.5%, the Nasdaq dropped 3.1%, and other AI-related stocks like Arm, Broadcom, and Oracle saw declines of over 10%.

6. How much did Nvidia CEO Jensen Huang lose?

Nvidia CEO Jensen Huang’s net worth dropped by $21 billion on Monday, falling from $124.4 billion to $103.1 billion.

7. Is Nvidia still the most valuable company in the world?

No, Nvidia lost its position as the world’s most valuable company after the market decline. Its valuation dropped to $2.9 trillion, putting it behind Apple and Microsoft.

8. Will Nvidia remain essential to AI development?

Despite competition, Nvidia’s GPUs are still considered essential for creating advanced AI systems. However, cost-efficient developments like DeepSeek’s model may pressure Nvidia to adapt its pricing and strategy.

9. How does this loss compare to other historic stock market losses?

Nvidia’s $600 billion market cap loss is the largest single-day loss in history. It surpasses Nvidia’s previous $279 billion loss in 2024 and Meta’s $251 billion loss in 2022.

Mahamana News Desk
Mahamana News Deskhttp://mahamananews.com
Mahamana News Desk is a collaborative editorial team dedicated to delivering in-depth analysis, breaking news, and thoughtful commentary on a wide range of topics, including politics, culture, and global events. With a commitment to accuracy and unbiased reporting, the Mahamana News Desk aims to keep readers informed and engaged through reliable journalism and insightful perspectives.

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